The Future Economy with Joel Mokyr

Allison Schrager of city-journal has a superb interview/podcast with Prof Joel Mokyr.

Allison Schrager: Welcome to Risk Talking, a new economics podcast. You may wonder, “There’s a lot of economic podcasts, why do we need another one?” Well, this one takes a slightly different tack. We take the biggest economic questions of the day, we talk to the most interesting minds of the field, and to be honest, this is what economists do. I feel like I am always trying to get answers to these questions, and I have these fabulous conversations with all these very smart economists I’m lucky enough to have access to, and I always thought it would be great if everyone could listen in. For the first episode, I could think of no one better to speak to than Joel Mokyr, mainly because I’ve been a huge fan since I was in undergrad and just really enjoyed reading his research on economic history. He is the most prescient economic historian that you will ever meet, mainly because he understands how technology changes economies in really profound ways. And his insights about what happened in the Industrial Revolution offer a lot of lessons for the changes we have today.

Three hundred years is merely a blip in the history of humanity, let alone the history of the world. But since the 18th century, mankind has experienced a staggering revolution. Technological innovations have transformed the way we live, delivering immense gains in life expectancy, freeing us from back-breaking labor, and generating innovations that change our way of life, unleashing prosperity that has no precedent in world history.

What sparked this revolution? Scientists, philosophers, and politicians have long sought to answer this question, but Joel Mokyr’s work takes an economic approach examining the intellectual roots of the industrial revolution with rigor and originality. Joel is an economic historian and professor at Northwestern University, where he has taught for nearly 50 years. He’s written extensively on the relationship between ideas and innovation in his books, which include The Gifts of Athena: Historical Origins of the Knowledge Economy and The Enlightened Economy: An Economic History of Britain from 1700 to 1850. Most recently, he wrote A Culture of Growth: The Origins of the Modern Economy in which he makes the case that enlightenment culture spurred the industrial revolution. Joel and I discussed a wide range of topics: What drives economic growth, what system of government best encourages innovation, whether the intellectual environment is becoming less open to new ideas, and the future of work in an increasingly virtual world. A conversation with Joel is an education, and I’m excited to share his thoughts with you.

What drove economic growth?

Allison Schrager: Let’s jump right in with what may be one of the most controversial question in economic history, which is, humans made some progress and dawdled along for a long time, but then starting a couple 100 years ago, we experienced these huge, huge unprecedented gains in productivity and living standards, and they’ve sustained themselves for hundreds of years. So, why did industrialization happen? What spark drove this, and why did it happen where it did?

Joel Mokyr: That is the $64 million question, of course, so I’ll give you my take on it, and other people will probably differ. You’re right. Much of human history is not a history of long-term progress and economic growth. And there’s some debate as to whether there was no growth at all, as some people have argued, or whether the growth was absolutely minimal and infinitesimal. But even very low rates of growth, if you compound them over thousands of years, they will result in some increase in living standards. I would say by 1700, most people in the world, at least the world that’s documented, which would be Asia and Europe, probably were living at a higher living standard than people did during the Roman empire, but not by a huge amount.

And so, something happened in the 18th century that changed all that, and the real question is, what was it? I’ll give you my take on it, and people can debate it. You said the question was controversial, so will my answer be, but I don’t care. Here is the point. Economic growth and economic progress is not driven by the masses. It is not driven by the population at large. It is driven by a small minority of people who economists refer to in their funny language as upper-tail people, meaning if you think of the world following some kind of bell-shaped or normal distribution, it’s the elite, it’s the people who are educated—not necessarily intellectuals. They could be engineers, they could be mechanics, they could be applied mathematicians.

They don’t have to be philosophers, but they have to be people who are really good in what they’re doing, and I think those are the people who are driving economic progress. I’m not just thinking James Watt and five people. It’s not that simple. But I would say, if you look at the top 2 percent or 3 percent of the population anywhere, those are the people that are driving economic growth. And that’s still the case. I mean, in the United States, much of the technological progress they’ve been experiencing has been driven by a fairly small number of people. Some of them are Caltech geeks, and some of them are just really good people who are coming up with novel ideas, but basically that’s what it is about.

And so, what changed is our ability to generate better technology. And in doing so, we owe a lot to a fairly small elite who underwent major cultural and social changes in the previous centuries. And that’s what I try to outline in my book, A Culture of Growth. And A Culture of Growth isn’t really about culture as we generally define it. I don’t particularly spend a lot of time worrying about things like religion or popular culture, or things like that. I look at the people who are driving the economic growth, and that’s all way down from Newton and Galileo to a bunch of engineers that very few people have ever heard of. But these are the people who built the machinery and came up with the fundamental ideas that made economic growth possible. And you can see that starting to happen in the late 17th, early 18th century, and it’s closely associated with what we typically call the Enlightenment.

But it’s important to realize that the Enlightenment was about many things. It was about the state, it was about philosophy, it was about human freedom, and justice, and all kind of things. And I’m just cutting out a small slice of that huge pie, which is about economics. And I call that the industrial enlightenment, and it really is about how to achieve material progress. And material progress isn’t all progress, and people were also interested in establishing more human rights and a civil society and the social contract, and I’m all for that, but that’s not what economics are about. They are about economic growth, and when you say economic growth, in this period you’re talking first and foremost about technology. You’re talking about machinery, you’re talking about ideas, you’re talking about all kind of contraptions that make life in some way better.

And it’s not just about the steam engine or the mule or anything like that, it’s about ideas that try to manipulate nature in a way that benefits humans. And so, I’ll give you one example—it’s not machinery, but it is very critical. It’s vaccination against smallpox, which is very much on people’s minds these days, right? But this is an 18th-century idea. This English country doctor, Edward Jenner, basically came up with this idea. It’s not a machine in any way, but it is a pathbreaking, I would say a radical idea, of how to use what we know about nature to improve human life. And that’s what economic growth in the end is all about. Now, it’s not all human life, it’s material things. It’s how not to get sick, how to get more to eat, how to have better clothing, better housing, to heat your place, to be warmer in the winter and cooler in the summer.

It’s about all these things that define our material comfort and our material wellbeing. It doesn’t necessarily create a better society, and I would have never argued that. I’m not even sure what a better society really is, but even if I knew that, I would say it’s not obvious that society in the 20th century, which after all produced Stalin and Hitler, is necessarily a better place than it was in the 18th century. I mean, that would be an absolutely absurd statement, but what is clear is that life in the 20th century anywhere on this globe is better than it was in the 18th century, in the narrow and somewhat limited material sense that economists are interested in.

Mokyr discusses China, why productivity stats underestimate productivity..


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